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An interview with the RE/MAX Allegiance leadership team

RISMEDIA, Oct. 22, 2007-Founded in July 2003, RE/MAX Allegiance is a 40-office, 1,400-agent company in Maryland, Virginia, and Washington, D.C. that stood No. 13 in sales volume in the 2006 RISMedia Power Broker survey for 2006. Traditionally, it is difficult for “100%” brokerages to achieve this size and level of accomplishment. In this exclusive interview with company President Judy Austin, Chairman, Charlie Bengel, and CEO Bob Blount, we find out just how RE/MAX Allegiance is approaching today’s market and enjoying this level of success.

Real Estate magazine: How did you get to this size so quickly?
Judy Austin:
We are the result of a merger of four RE/MAX brokerages. When we merged we had 850 agents. Two later mergers brought 80 agents. The rest of the 1,400 came from growth one agent at a time.

RE: Why did you merge?
Charlie Bengel:
The Internet, higher consumer expectations and the entrance into our industry of some very large players made our partners worried about their ability to bring competitive products and services to our agents. We wanted a long-term strategy that addressed these issues. Also, the average RE/MAX broker/owner is about 60 years old. We may be able to help with an exit or partner strategy. We also can deliver some quality, turnkey mortgage and title solutions because of our size.

RE: Please describe your business philosophy?
JA:
Well, we are very sure it’s about the consumer.

CB: We are convinced that technology and industry trends offer up an opportunity for everyone to win-the brokerage, the agent and the consumer. Many brokerages are trying to use the Internet and mortgage products to get to consumers first so that they can “control” their agents through leads and referral fees. We think that’s a mistake. This is a “trust” business and agents are the primary problem solvers. We want them to have a vested interest in a long-term relationship with consumers.

Bob Blount: That’s right. The so-called “innovation” in our industry has followed two paths: give less service to lower the price to the consumer; or control the agents, pay them less and pass some of the savings to the consumer. Our experience is that consumers want more service and to pay less. We believe this is possible and our model is to keep the agent in the role of trusted advisor and deliver a more predictable outcome to consumers, while reducing total cost. In short, better service at less cost, recognizing that this is a local “people” business. The best service to consumers is delivered when the broker understands that the agent “owns” the consumer relationship and enables them to deliver top-notch service.

RE: So you are requiring your agents to lower fees?
BB:
No. We believe that market competition will determine fees. Our agents are good business people. We deliver products and services and consumer savings to our agents that they can take to consumers to justify their fees. Cheap is easy, value is tough. I’m not going to say that we have any “final” solution, but we do have a good one. And, if someone in any part of the country has a great idea in the morning, we intend to bring it into our business solution by the afternoon.

RE: Tell us about your business solution.
CB:
We were lucky. Because we have offices 300 miles apart, we had to use the Internet from day one for accounting, training, and almost all of our business applications. Because we got to be our size very quickly, we weren’t stuck with legacy systems.

JA: We want to make our agents’ lives easier. We want them to focus on customer service while we do the heavy lifting in products and services. We have taken great advantage of RE/MAX International, especially its national TV advertising, the RE/MAX Satellite Network, and RE/MAX University. When we combine the training and coaching capabilities of RE/MAX International with those of our Allegiance University, our capabilities in this area are second to none. We even have an annual company Convention, complete with national speakers and vendors displaying the latest products.

BB: As an aid in answering this question, we have provided a diagram segmenting our solution and listing key areas under each segment (see sidebar). We are most proud of the fact that this is an integrated solution, right down to providing every agent with their own Internet site with all MLS listings, mapping, aerial photography, school and community comparisons, and even consumer property valuation tools. When we enter data into our accounting operations, it flows everywhere, including to individual agent contact management functions, which, in turn, are integrated with our marketing and mailing solutions.

We are fast moving to a solution where, with a few key strokes, an agent newly signed with us automatically gets their own contact manager integrated with their Internet site, online billings and payments, automatic marketing and follow-up systems, a personal business e-mail address, commissions deposited electronically to their bank account, personalized consumer presentations generated online, virus protection updated each time they log onto the Internet, listing data provided automatically to multiple Internet portals, and so on.

Agents also receive online access to their transaction documents. We provide electronic document management, storage and retrieval.

RE: Do you do anything special in regard to agent teams?
JA:
Individual agents will always be critical to our business model. However, the growth of teams and the quality service they can provide is a real phenomenon in our industry. RE/MAX Allegiance is built to support teams providing training and coaching, contact management systems that support team assignments and multiple simultaneous users, Web sites designed for teams, and even separate office locations for qualifying team leaders. Agents have had their own practices for years. We are helping them to take their business to the next level without the cost and risk of opening a brokerage. And we want them to have something they can sell when they retire.

BB: And we’ve taken it a step farther. We can help them to have their own mortgage and title operations if there is enough business to meet RESPA requirements. This has been quite an undertaking. We’ve been active in RESPRO and have spent hundreds of thousands of dollars to ensure RESPA compliance.

RE: You mentioned agent Web sites. What is your strategy in that area?
CB:
We provide every agent and every team with a high quality, customizable site. Frankly, we have agents who are not proficient on the Web, but they look great to consumers. It is our job to turn the Internet into phone calls and e-mails for our agents so they can focus on customer service.

BB: Agent sites include IDX listings, where allowed by the local MLS, mapping showing the locations of amenities, aerial photography, consumer alerts for new listings, price changes, and newly sold properties in selected locations, school and community information and comparisons, etc., with leads going into the agent’s contact management system. Agents can customize a number of features and set links. And we have some pretty exciting things in the works.

JA: And we optionally can respond to screen Internet leads for an agent, ensuring quick response and, yet, keeping the agent fully informed. Most importantly, we do not charge referral fees for leads, even on leads that we generate.

RE: So you generate Internet leads for your associates?

BB: Yes. We view that as a critical area of competition among brokerages, so critical that it will threaten the survival of brokerages that cannot compete. In market after market across the country, there’s no brokerage or agent Web site in the top 20 destinations for real estate searches. We don’t see that changing and pay per click and pay for placement are becoming more and more expensive. We will drive leads to our agents by automatically placing their lists on portals that allow the consumer to link to us or to the agent.

JA: And remax.com is an absolute home run. It is becoming the portal of choice, the trusted source for more and more people. When you combine remax.com with RE/MAX International’s national TV advertising and our local marketing, TV, and magazines, that’s an unparalleled advantage for our associates.

RE: You mentioned mortgage and title earlier. Are you in those businesses? If so, why?

BB: The brokerage is not in these businesses. However, we have set up separate companies to be in those businesses. In fact, we even set up a company to manage those relationships and operations. We are a growth model and we want to bring quality mortgage, title and insurance opportunities to future operations and partners. We cannot be in a position of depending solely upon a local managing broker to get the job done.

These mortgage and title operations are affiliated businesses arrangements. Contrary to some ill-informed press, affiliated businesses are fully capable of competing on service and price. Frankly, they have to be. Agents simply are not going to risk customer relationships to support second rate operations. There are savings in redundant space, equipment, and utilities and we have moved the business process into a transaction management segment of our integrated solution. By requiring mortgage and title and settlement operations to support a business process, and by making that business process transparent to agents, we can guarantee closing costs, closing date, a timely settlement document, savings, and whatever else we elect to package to benefit consumers.

Transaction Management has not been what it could be because the focus has been on agents doing data entry, signing up vendors, and doing a show and tell with customers. The first is a waste of agent time and the second two may come but, for now, the effort does not justify the results. We think it is a back office function that facilitates a shared business process, guaranteed deliverables to agents and their consumers, and can move appropriate information to brokerage, mortgage, title and settlement operations and into agent contact management and marketing/follow-up activities. Most of the data entry is pulled from MLS data, public records data, documents originated by agents electronically, existing databases, or from our accounting operations. Individual agents and team leaders are able to use the system to manage vendors if they desire.

RE: You are managing a lot of client data for your agents. Aren’t they afraid of abuse?
CB:
No. We’ve joked with them that if we abused their data, that whooshing sound would be agents going out the door. It’s their data. We don’t abuse it. A key ingredient of our culture is that the agent owns the consumer relationship, while we facilitate it with products and services.

RE: Are there sources of income to your associates beyond brokerage?
CB:
Yes, we have a partner program where agents who help us to recruit are paid a monthly fee for so long as the recruited agent is with us. This program has no impact on the fees paid by the agent who joins us. And, unlike the pyramid programs in the industry, it does not depend on our profitability.

During the go-go times when there was a huge run up in the number of agents there were lots of promises by pyramid schemes pretending to be stable, long-term sources of income. In an industry where the average agent does six transactions a year and is out of the business in three years, that’s just foolishness. And it’s simply over charging one agent to pay another. We think career professionals are too smart for that.

BB: Agents are able to make RESPA compliant investments in mortgage and title operations and receive returns based solely on that investment. It is our policy to dismiss an agent if they were to knowingly withhold information about a better deal for the consumer than that provided by one of our affiliated businesses. It’s the law and the fair thing to do. That’s our culture and we live by it.

RE: What are some of the biggest challenges for you or for our industry?
JA:
It’s all about the consumer experience. We have to help our agents to provide them with a quality, predictable experience. We’ve shared with you some of the steps we’ve taken to date to do that-including Web sites, guaranteed deliverables, and online transaction management systems

BB: I fully agree. Consumers don’t care about one-stop shopping. They care about knowing what’s going on, control and making their life easy. As an industry, we’d better figure that out.

I would also throw in RESPA compliance and the appropriate use of the MLS as critical issues for our industry. RESPA is poorly understood and poorly enforced. Too many agents who would never dream of doing anything other than their best in brokerage services seem to think nothing of getting paid for referrals, often through “joint” advertising that never would be done if it were not for the referral of business.

We are encouraging MLSs to promote public Web sites as an alternative to brokers and agents rushing to send their listings to competing portals that want to up sell them. We are not against any business model. The best ones will win. We are, however, totally for fully leveraging the data and content our industry has. Current MLS rules and functions grew out of a time long past. Almost no brokerage or agent sites are in the top 20 real estate destinations in their respective markets. What we brokerages are doing is not working and consumers are going in droves to portals because we have not given them what they want. It’s time to bring an old tool into a new age.

CB: Another issue is there simply are too many agents competing for too little business. The market will correct for this to some degree. But it is time for there to be higher educational standards and performance standards. Also, while we are highly supportive of our trade association, would it make more sense if dues were based on transactions rather than head count? There is nothing healthy about membership twice what is needed.

BB: Brokers are obligated to control the advertising of their listings. There is also broker liability to sellers. Real estate magazines and others are redirecting listings to third parties and, sometimes, the broker/agent contact information is stripped. Or, off market listings remain on sites, or listings contain incorrect information. We need to know where our listings are and require second parties to get permission to redirect our listings. While others make money and sell us back our own listings, we get liability in return.

RE: Closing thoughts?
CB:
We are here to do business for the long term. We are both an Internet company and a “sticks and bricks” company. We believe that agents, with their trust-based personal relationships with consumers, are the owners of the consumer relationship. We see our supporting that relationship with great products, services and savings and a win for all involved. These are exciting times.

For more information, please e-mail RE/MAX Allegiance at bob.blount@rmxtalk.com or visit www.sell4.com.

192.168.100.57